By Marissa McArdle, SVP, Product Management at DoubleVerify
Broadcasters leveraging a Connected TV (CTV) and Over-the-Top (OTT) strategy face a new challenge as advertiser perception of user-generated content (UGC), led by social media platforms like Instagram, TikTok, and YouTube, is beginning to shift. Many advertisers now consider UGC video a valuable, premium component of their overall video strategy and are migrating budget over from linear TV.
This new challenge comes at a critical time as broadcasters continue the battle to recapture viewership and revenue lost to cordcutters. Pay TV revenue in the U.S. dropped dramatically, from $100.1 billion to $86.21 billion from 2017-2022. While broadcasters increasingly offer streaming alternatives to counter that trend, a lack of transparency into the content ads run against has, unfortunately, not made streaming a true one-to-one alternative for advertiser TV buys (at least not yet).
Much of this is due to concern with violating a 1980’s era law called the Video Privacy Protection Act (VPPA) that prohibits exposing an individual’s viewership history. UGC environments, however, deal with similar – and, in many cases, more onerous – challenges daily, and are constantly balancing privacy concerns with the advertiser’s need for transparency. UGC has, in fact, embraced transparency, working closely with regulators, creating more consumer-facing ad tools, and accepting independent verification. This has made the absence of greater measurement and transparency in CTV more pronounced, and hasn’t gone unnoticed by every major video buyer in the ecosystem.
With that in mind, I believe that broadcasters can learn from UGC’s evolution in transparency and controls to recapture video ad dollars.
How UGC Became a Premium Channel
Phase 1: Content Quality
The first phase of UGC’s evolution began by elevating the quality of the overall content experience. This transformation has primarily been driven by two key developments: the improvement in content quality and the rise of influencers.
Initially, advancements in affordable videography technology enabled creators to produce high-quality content, allowing UGC to rival professional, studio-based productions. YouTube stars like Mr Beast, for example, can spend millions of dollars on his videos, and other influencers have significantly improved their production quality. Platforms like YouTube, Meta, and Twitch have also rolled out new tools to facilitate better productions.
Additionally, platforms are now rewarding creators more generously, acknowledging their critical role in attracting audiences. Google has even said that its payouts to creators – $30 billion over a three year period – are in the same neighborhood as the content spending doled out by giants like Netflix. Tied to this, influencers are becoming as influential as celebrities, with their content now viewed as valuable and premium, much like traditional media.
Unsurprisingly, as content quality has gone up, the viewing experience has also evolved. Users are now watching UGC platforms, like YouTube, on large CTV devices. Consequently, while UGC was always valued for its authenticity and ability to drive audience engagement, it has become recognized for offering premium content that competes with longer form video.
Phase 2: Balancing Privacy & Transparency
The second phase of UCG’s evolution involved reconciling privacy concerns and sensitive data with the advertiser’s need for transparency through the use of data clean rooms and other privacy compliant server side measurement techniques.
Like broadcasters, UGC and social media platforms were reluctant to provide greater transparency. Today, however, the major players have committed to offering extensive data, insights, and measurements. They have managed to do this while addressing challenges unique to UGC, such as in-feed environments and privacy concerns.
In contrast, content providers on TV and CTV with episodic programming, although also dealing with privacy compliance, have been slower to make this transition. This has been the case even though they are not burdened with the additional complexities caused by a continuous stream of net-new content created by users. Transparency remains a key issue for TV advertisers, as highlighted by a recent survey we conducted with IAB Europe. For example, only 30% of advertisers and publishers said they have full transparency into where their ads are placed.
Phase 3: Brand Safety & Suitability
The third phase of this evolution began when UGC put their investment to use and started offering advertisers more brand suitability controls and transparency — and this is the specific area in which broadcasters can make strides.
In fact, Cleveland Research Company indicates that agencies are suggesting increased transparency and content suitability controls are the primary reasons why advertisers are shifting budget into UGC platforms. This issue has led many advertisers to withhold their spending or divert it to social video and UGC platforms, where more granular measurement exists and lower media costs until it is resolved.
Further, CTV streaming channels, with a median cost of $50 CPMs, are substantially more expensive in comparison to UGC platforms like YouTube. CTV prices are 122% more expensive, in fact, than the median cost for YouTube. These cost disparities are more pronounced in light of the rising premium perception and value attached to UGC – not to mention the fact that millions are now watching UGC on platforms like YouTube via connected TVs.
Findings from The Trade Desk’s 2023 Open Internet Report underscore how a lack of transparency affects broadcasters’ ability to secure a proportional share of digital spending. The report reveals a discrepancy between viewer engagement and advertising spend. Users spend 59% of their time on the open web (including CTV), and only 41% on walled gardens. However, advertisers allocate just 48% of their digital spending to the open web. By introducing greater clarity and verification, CTV advertisers could gain more confidence in their investments and campaigns.
To increase their market share, broadcasters and other episodic content creators need to match the level of transparency offered by other digital platforms, and that process must be accelerated. Some broadcasters are heeding the call for transparency by offering more granular measurement and reporting. Adopting content-specific measurements and integrating standardized third-party reporting will bridge the gap, better positioning CTV alongside premium short-form content on platforms like TikTok and YouTube. Until then, UGC platforms will exploit the lack of measurement in CTV and OTT and win more of those ad dollars.
The imperative for broadcasters monetizing content on CTV and OTT is clear – mirror and exceed UGC’s transparency benchmarks. It’s a requisite transformation, not just to preserve their market share but also to elevate the entire ecosystem to adopt a paradigm where transparency, clarity and trust are not aspirations, but expectations. In this evolving landscape, transparency is not just a competitive advantage but the cornerstone of sustainability, growth and innovation.